Alibaba revenue grows slowest since 2014 on sales drop and competition

Chinese e-commerce giant Alibaba Group Holding reported on Thursday its slowest quarterly revenue growth since going public in 2014, hit by a drop in sales at its core business segment and intensifying competition.

The slowing Chinese economy has also taken a toll on the company as consumers cut back discretionary spending.

Alibaba said group revenue rose about 10% in October-December 2021 to ¥242.6bn, marking the first time quarterly sales growth has fallen below 20%.

Analysts on average had expected revenue of ¥246.37bn, according to Refinitiv data.

Customer management revenue, a key metric tracking how much money merchants spend on ads and promotions on Alibaba's sites, fell 1% year-on-year.

That marks the first time revenue for the segment, which made up 41% of Alibaba's total revenue, has decreased since the company's IPO.

Speaking on an investor call, deputy CFO Toby Xu said the drop was caused partly by lowering merchant fees amid the slowing economy.

During China's annual Singles' Day promotional event last November, the company recorded gross merchandise value growth of 8.5%, a record low.

Alibaba's shares were down about 3% in New York before the opening bell. They fell about 7% after the results were announced, tracking losses in global shares after Russia launched an all-out invasion of Ukraine.

Advertising dollars

Alibaba is also facing intensifying pressure from rivals such as ByteDance-owned Douyin and Kuaishou, which have capitalised on the booming trend of livestreaming e-commerce.

“Merchants now have to allocate their advertising dollars to different platforms,” said Vinci Zhang, who tracks China's e-commerce sector at research firm Pacific Epoch.

“In the past, if you were an apparel merchant, maybe you would allocate 100% to Alibaba, but now a percentage of that goes to the short video players.”

Ant Group, Alibaba's fintech affiliate, reported a profit of about ¥17.6bn for the quarter ended September, according to Alibaba's filings on Thursday, compared with ¥15bn a year ago.

Alibaba reports its profit from Ant one quarter in arrears.

Ant has been subjected to a sweeping restructuring by China, which derailed its $37bn initial public offering in late 2020.

For the nine months ending in December, the company purchased about $7.7bn worth of shares.

Fiscal third-quarter revenue for the company's cloud business grew 20% year-on-year to hit ¥19.5bn, but adjusted core earnings (Ebitda) for the unit declined 66% from the previous quarter.

“It seems like Alibaba is finding it difficult to maintain the growth trajectory in most markets including the cloud business,” said Oshadhi Kumarasiri, an analyst at Lightstream Research.

Fallen behind

Quarterly net income attributable to shareholders slumped to ¥20.43 from ¥79.43bn a year earlier.

Once Asia's biggest listed company, Alibaba has long given up its crown to Taiwanese chipmaker TSMC, and even fallen behind local rival Tencent and beverage maker Kweichow Moutai.

The company's US-listed shares have lost about half their value in the past 12 months amid Beijing's regulatory crackdown on certain industries.

Reuters